Iran war enters fourth day in 'smoke and blood' as global markets slide

Iranian drones hit US embassy in Saudi Arabia, causing minor fire damage, after earlier striking Kuwait mission

Explosions tore through Tehran and Beirut on Tuesday and financial markets around the world tumbled at the prospect of a prolonged disruption to global energy supplies from the US-Israeli air war against Iran.

Iranian drones slammed into the US embassy in Saudi ​Arabia, causing minor damage and starting a fire, after previously hitting the mission in Kuwait. Washington responded by shutting those missions and ordering non-emergency government personnel and their families to leave countries across the Middle East.

A ‌day after US President Donald Trump and Prime Minister Benjamin Netanyahu gave open-ended answers when asked how long the war would last, a source told Reuters that Israel's campaign had been planned to last two weeks and was moving faster than expected.

The source, familiar with Israel's war plan, said its aim was to overthrow Iran's clerical rulers, and there was no firm deadline to achieve it.

But the Israeli military was going through its target list faster than planned, with early success killing Iran's leaders and taking out its defences, the source said. Israel was also accelerating its campaign out of concern ​that Washington might agree with Iran's surviving leaders to stop before Israel's objectives were realised, the source added.

Read More: US embassy warns of imminent attack in eastern Saudi Arabia

Global markets slid as the disruption of Middle East energy supplies threatened to reignite post-pandemic inflation. The price of crude oil was up by 15% in two days, and the ​European wholesale price for natural gas was up a punishing 40%.

Europe's benchmark STOXX 600 index fell 3% in early trading, after a 1.7% drop on Monday. Shares in energy import-dependent South Korea plunged more than 7%. A 2% fall in U.S. stock futures ​suggested the selloff was headed for Wall Street.

Iran has called the war an unprovoked attack. It has responded by firing missiles and drones at neighbouring Arab states and strangling shipping through the Strait of Hormuz, where a fifth of the world's oil and liquefied natural gas trade travels past its coast.

Qatar, one of the world's main exporters of LNG, has halted production, while tankers have dropped anchor in the Gulf rather than brave the strait.

Also Read: Iran says death toll approaches 800 in aftermath of US-Israel strikes

The cost of hiring a tanker to ship oil from the Middle East to Asia has nearly quadrupled since last week ​to an all-time high well over $400,000 a day.

The US-Israeli attacks killed Iranian Supreme Leader Ayatollah Ali Khamenei on day one, in what may have been history's first assassination of a national leader by enemy forces from the air. If the campaign were ​to achieve the aim of overthrowing Iran's ruling system using air power with no armed force on the ground, that would also be a first.

Since Monday, the war has spread to Lebanon, where Iran's Hezbollah allies fired on Israel, which responded with air strikes and reinforcements of ‌ground positions in ⁠the south. Thick black smoke blanketed Beirut as the sound of explosions rumbled in the air. Authorities said dozens were killed there.

State media showed hundreds packing the streets of the southern city of Minab to mourn scores of girls killed in the bombing of a girls' school on the war's first day, by far the worst of several reported attacks to hit civilian targets. The UN human rights office demanded an investigation into the strike, which its spokesperson called "absolutely horrific".

Graphic: A map of attacks and counterattacks.

Rubio says Washington attacked knowing Israel would strike

While ​Israeli officials explicitly say they want to overthrow Iran's ⁠government, US officials have said the war's aim is to destroy Iran's ability to project force beyond its borders. But Trump has also urged Iranians to topple the clerical leadership, an enemy that has tormented the United States and its allies for generations.

In a social media post, Trump wrote: "Their air defense, Air Force, Navy, and Leadership is gone. They want to talk. I said 'Too Late!'"

Speaking ​to reporters on Capitol Hill on Monday, Secretary of State Marco Rubio said the US attacked Iran after determining that Israel was on the verge of launching its own strike. ​Washington believed any Israeli attack would ⁠prompt Iran to retaliate against US interests.

"We knew that if we didn't preemptively go after them before they launched those attacks, we would suffer higher casualties," Rubio said.

Netanyahu said on Monday the war was "not going to take years". Trump suggested it could take four or five weeks. But both avoided giving any firm timeframe, leaving open the prospect of a broad, open-ended war.

Israeli Lieutenant Colonel Nadav Shoshani told an online briefing that the duration could depend on developments, adding: "We have prepared a general scope of weeks." Asked if Israel could deploy ground forces to ⁠Iran, Shoshani said ​that was unlikely.

In Israel, air raid sirens sounded repeatedly, warning of incoming attacks and sending millions into bomb shelters. In Tel Aviv, buildings shook as ​air defences intercepted incoming Iranian missiles.

Global air transport has also been in chaos, with airports shut in the Middle East that serve as hubs linking Asia, Europe and Africa.